** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM10-Q**

 

**(Mark one)**

 

**ý****  Quarterly report pursuant to Section 13 or15(d) of the Securities Exchange Act of 1934**

 

**Forthe quarterly period ended June 30, 2003**

 

**OR**

 

**o****  Transition report pursuant to Section 13 or****15(d) of the SecuritiesExchange Act of 1934**

 

**CommissionFile Number:  0-31151**

 

 

**RADVIEWSOFTWARE LTD.**

(Exact name of registrant as specified in itscharter)

 

| **Israel**                                                                          |   | **Not applicable**                    |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of   incorporation or organization)                    |   | (I.R.S. Employer  Identification No.) |
|                                                                                |   |                                  |
| **7 New England Executive Park  Burlington, MA 01803**                              |
| (Address of principal executive offices)                                            |
|                                                                                |
| **Telephone Number (781) 238-1111**                                                 |
| (Registrant’s telephone number, including  area code)                          |
|                                                                                |
| **None**                                                                            |
| (Former name, former address and former  fiscal year, if changed since last report) |

 

 

Indicate bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) Yes ý   No o,and (2) has been subject to such filing requirements for the past 90 days:  Yes ý   No o.

 

Indicate bycheck mark whether the registrant is an accelerated filer (as defined in Rule126-2 of the Exchange Act):  Yes o   No ý

 

As of July 31,2003, there were 16,494,313 shares of the Registrant’s Ordinary Sharesoutstanding, excluding 134,000 Ordinary Shares held by the registrant astreasury shares that are “dormant” shares for purposes of Israeli law.

 

 

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**RADVIEW SOFTWARE LTD. AND SUBSIDIARIES**

Form 10-Q INDEX

 

** **
| **PART I. FINANCIAL INFORMATION** |
|-----------------------------------|
|                              |   |   |
| Item 1.                           |   | Condensed Consolidated Financial Statements: |
|                              |   |   |   |   |
|                              |   | Condensed Consolidated Balance Sheets as of  June 30, 2003 and December 31, 2002 |
|                              |   |   |   |   |
|                              |   | Condensed Consolidated Statements of  Operations for the three and six months ended June 30, 2003 and 2002 |
|                              |   |   |   |   |
|                              |   | Condensed Consolidated Statements of Cash  Flows for the six months ended June 30, 2003 and 2002 |
|                              |   |   |   |   |
|                              |   | Notes to Condensed Consolidated Financial  Statements |
|                              |   |   |   |   |
| Item 2.                           |   | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |
|                              |   |   |   |   |
| Item 3.                           |   | Quantitative  and Qualitative Disclosures About Market Risk |
|                              |   |   |   |   |
| Item 4.                           |   | Controls  and Procedures |
|                              |   |   |   |   |
| **PART II. OTHER INFORMATION**    |
|                              |   |   |   |   |
| Item 2.                           |   | Changes in Securities and Use of Proceeds |
|                              |   |   |   |   |
| Item 6.                           |   | Exhibits and Reports on Form 8-K |
|                              |   |   |   |   |
|                              |   | Signatures |

 

2

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**PART I****- FINANCIALINFORMATION**

 

**RADVIEW SOFTWARE LTD.AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(Inthousands, except share data)**

**(Unaudited)**

 
|                                                                                                                                                                                                                                                                              |   | **June 30,  2003** |   | **December 31,  2002** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|------------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                                        |   |               |   |                   |   |
| Current  Assets:                                                                                                                                                                                                                                                                  |   |               |   |                   |   |
| Cash and cash  equivalents                                                                                                                                                                                                                                                        |   | $                  | 5,012  |                   | $      | 7,566 |   |
| Accounts receivable,  net of reserves of $83 at June 30, 2003 and   $171 at December 31, 2002                                                                                                                                                                                |   | 886                |   | 1,026                  |   |
| Prepaid  expenses and other current assets                                                                                                                                                                                                                                        |   | 384                |   | 506                    |   |
| Total Current  Assets                                                                                                                                                                                                                                                             |   | 6,282              |   | 9,098                  |   |
|                                                                                                                                                                                                                                                                              |   |               |   |                   |   |
| Property and  Equipment, net                                                                                                                                                                                                                                                      |   | 535                |   | 826                    |   |
| Other Assets                                                                                                                                                                                                                                                                      |   | 586                |   | 683                    |   |
|                                                                                                                                                                                                                                                                              |   |               |   |                   |   |
| Total Assets                                                                                                                                                                                                                                                                      |   | $                  | 7,403  |                   | $      | 10,607 |   |
|                                                                                                                                                                                                                                                                              |   |               |   |                   |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                                                     |   |               |   |                   |   |
| Current  Liabilities:                                                                                                                                                                                                                                                             |   |               |   |                   |   |
| Accounts  payable                                                                                                                                                                                                                                                                 |   | $                  | 395    |                   | $      | 358 |   |
| Accrued  expenses                                                                                                                                                                                                                                                                 |   | 1,072              |   | 1,503                  |   |
| Accrued  restructuring charge, current portion                                                                                                                                                                                                                                    |   | 377                |   | 271                    |   |
| Deferred  revenue                                                                                                                                                                                                                                                                 |   | 1,173              |   | 1,051                  |   |
| Total Current  Liabilities                                                                                                                                                                                                                                                        |   | 3,017              |   | 3,183                  |   |
|                                                                                                                                                                                                                                                                              |   |               |   |                   |   |
| Long-term  Liabilities:                                                                                                                                                                                                                                                           |   |               |   |                   |   |
| Accrued  restructuring charge, less current portion                                                                                                                                                                                                                               |   | 223                |   | 341                    |   |
| Accrued  severance                                                                                                                                                                                                                                                                |   | 570                |   | 772                    |   |
| Total  Long-Term Liabilities                                                                                                                                                                                                                                                      |   | 793                |   | 1,113                  |   |
|                                                                                                                                                                                                                                                                              |   |               |   |                   |   |
| Total  Liabilities                                                                                                                                                                                                                                                                |   | 3,810              |   | 4,296                  |   |
|                                                                                                                                                                                                                                                                              |   |               |   |                   |   |
| Shareholders’  Equity:                                                                                                                                                                                                                                                       |   |               |   |                   |   |
| Ordinary  shares, NIS 0.01 par value – Authorized – 40,000,000 shares; Issued –  16,617,814 shares at June 30, 2003 and 16,605,177 shares at December 31,  2002; Outstanding – 16,483,814 shares at June 30, 2003 and 16,471,177 shares  at December 31, 2002 |   | 42                 |   | 42                     |   |
| Treasury  shares, at cost – 134,000 shares                                                                                                                                                                                                                                   |   | (100               | )      | (100                   | )      |
| Additional  paid-in capital                                                                                                                                                                                                                                                       |   | 54,842             |   | 54,888                 |   |
| Deferred  compensation                                                                                                                                                                                                                                                            |   | (272               | )      | (536                   | )      |
| Accumulated  deficit                                                                                                                                                                                                                                                              |   | (50,919            | )      | (47,983                | )      |
| Total  Shareholders’ Equity                                                                                                                                                                                                                                                  |   | 3,593              |   | 6,311                  |   |
|                                                                                                                                                                                                                                                                              |   |               |   |                   |   |
| Total  Liabilities and Shareholders’ Equity                                                                                                                                                                                                                                  |   | $                  | 7,403  |                   | $      | 10,607 |   |

 

The accompanying notes are anintegral part of these condensed consolidated financial statements.

 

3

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**RADVIEWSOFTWARE LTD. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(Inthousands, except per share data)**

**(Unaudited)**

 
|                                                                                                  |   | **Three Months Ended  June 30,** |   | **Six Months Ended  June 30,** |   |
|-------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|--------------------------------|--------|
|                                                                                                  |   | **2003**                         |   | **2002**                       |   | **2003** |   | **2002** |   |
| Revenues:                                                                                             |   |                             |   |                           |   |   |   |   |   |
| Software licenses                                                                                     |   | $                                | 622    |                           | $      | 801 |   | $ | 1,289 |   | $ | 1,779 |   |
| Service                                                                                               |   | 589                              |   | 617                            |   | 1,142 |   | 1,213 |   |
| Total Revenues                                                                                        |   | 1,211                            |   | 1,418                          |   | 2,431 |   | 2,992 |   |
|                                                                                                  |   |                             |   |                           |   |   |   |   |   |
| Cost of Sales:                                                                                        |   |                             |   |                           |   |   |   |   |   |
| Software licenses                                                                                     |   | 15                               |   | 12                             |   | 35 |   | 25 |   |
| Service                                                                                               |   | 111                              |   | 159                            |   | 230 |   | 319 |   |
| Total Cost of Sales                                                                                   |   | 126                              |   | 171                            |   | 265 |   | 344 |   |
|                                                                                                  |   |                             |   |                           |   |   |   |   |   |
| Gross Profit                                                                                          |   | 1,085                            |   | 1,247                          |   | 2,166 |   | 2,648 |   |
|                                                                                                  |   |                             |   |                           |   |   |   |   |   |
| Operating Expenses:                                                                                   |   |                             |   |                           |   |   |   |   |   |
| Sales and marketing                                                                                   |   | 1,040                            |   | 1,378                          |   | 2,270 |   | 2,816 |   |
| Research and development                                                                              |   | 650                              |   | 851                            |   | 1,500 |   | 1,715 |   |
| General and administrative                                                                            |   | 406                              |   | 482                            |   | 843 |   | 1,102 |   |
| Stock-based compensation (1)                                                                          |   | 103                              |   | 129                            |   | 214 |   | 279 |   |
| Restructuring charges (Note 4)                                                                        |   | 245                              |   | 131                            |   | 245 |   | 465 |   |
| Total Operating Expenses                                                                              |   | 2,444                            |   | 2,971                          |   | 5,072 |   | 6,377 |   |
|                                                                                                  |   |                             |   |                           |   |   |   |   |   |
| Operating loss                                                                                        |   | (1,359                           | )      | (1,724                         | )      | (2,906 | ) | (3,729 | ) |
|                                                                                                  |   |                             |   |                           |   |   |   |   |   |
| Interest income, net                                                                                  |   | 10                               |   | 34                             |   | 24 |   | 69 |   |
| Other income (expense)                                                                                |   | (46                              | )      | 53                             |   | (54 | ) | 78 |   |
|                                                                                                  |   |                             |   |                           |   |   |   |   |   |
| Net loss                                                                                              |   | $                                | (1,395 | )                              | $      | (1,637 | ) | $ | (2,936 | ) | $ | (3,582 | ) |
|                                                                                                  |   |                             |   |                           |   |   |   |   |   |
| Net loss per share:                                                                                   |   |                             |   |                           |   |   |   |   |   |
| Net loss per share – Basic and diluted                                                           |   | $                                | (0.08  | )                              | $      | (0.10 | ) | $ | (0.18 | ) | $ | (0.22 | ) |
|                                                                                                  |   |                             |   |                           |   |   |   |   |   |
| Weighted average number of shares  outstanding used in computing basic and diluted net loss per share |   | 16,478                           |   | 16,459                         |   | 16,474 |   | 16,452 |   |

 

----

| (1) The following summarizes the  departmental allocation of the stock-based compensation charge: |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Sales and marketing                                                                               |   | $      | 28     |   | $      | 44     |   | $      | 67     |   | $ | 88 |   |
| Research and development                                                                          |   | 36     |   | 47     |   | 80     |   | 108    |   |
| General and administrative                                                                        |   | 39     |   | 38     |   | 67     |   | 83     |   |
| Total stock-based compensation                                                                    |   | $      | 103    |   | $      | 129    |   | $      | 214    |   | $ | 279 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

4

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**RADVIEW SOFTWARE LTD. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS**

**(In thousands)**

**(Unaudited)**

** **
|                                                                              |   | **Six Months Ended  June 30,** |   |
|-----------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                              |   | **2003**                       |   | **2002** |   |
| Cash Flows  from Operating Activities:                                            |   |                           |   |   |   |
| Net loss                                                                          |   | $                              | (2,936 | ) | $ | (3,582 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities– |   |                           |   |   |   |
| Depreciation                                                                      |   | 372                            |   | 481 |   |
| Property and  equipment impairment write-off (Note 4)                             |   | —                         |   | 43 |   |
| Amortization  of deferred compensation                                            |   | 214                            |   | 279 |   |
| Accrued  severance pay                                                            |   | (202                           | )      | (31 | ) |
| Changes in  operating assets and liabilities–                                |   |                           |   |   |   |
| Accounts  receivable, net                                                         |   | 140                            |   | 432 |   |
| Prepaid  expenses and other current assets                                        |   | 122                            |   | 41 |   |
| Accounts  payable                                                                 |   | 37                             |   | (160 | ) |
| Accrued  expenses                                                                 |   | (431                           | )      | (194 | ) |
| Accrued  restructuring charge                                                     |   | (12                            | )      | 72 |   |
| Deferred  revenue                                                                 |   | 122                            |   | (143 | ) |
| Net cash used  in operating activities                                            |   | (2,574                         | )      | (2,762 | ) |
|                                                                              |   |                           |   |   |   |
| Cash Flows  from Investing Activities:                                            |   |                           |   |   |   |
| Purchases of  property and equipment                                              |   | (81                            | )      | (59 | ) |
| Decrease in  other assets                                                         |   | 97                             |   | 12 |   |
| Net cash  provided by (used in) investing activities                              |   | 16                             |   | (47 | ) |
|                                                                              |   |                           |   |   |   |
| Cash Flows  from Financing Activities:                                            |   |                           |   |   |   |
| Proceeds from  shares issued                                                      |   | 4                              |   | — |   |
| Net cash  provided by financing activities                                        |   | 4                              |   | — |   |
|                                                                              |   |                           |   |   |   |
| Decrease in  cash and cash equivalents                                            |   | (2,554                         | )      | (2,809 | ) |
|                                                                              |   |                           |   |   |   |
| Cash and cash  equivalents, beginning of period                                   |   | 7,566                          |   | 13,182 |   |
| Cash and cash  equivalents, end of period                                         |   | $                              | 5,012  |   | $ | 10,373 |   |
|                                                                              |   |                           |   |   |   |
| Cash paid  during period for interest                                             |   | $                              | 8      |   | $ | 15 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

5

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**RADVIEWSOFTWARE LTD. AND SUBSIDIARIES**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**1. ****Operations**

 

RadView Software Ltd. (collectively with its subsidiaries, the“Company”) is an Israeli corporation. The Company develops, markets and supports software that enablesorganizations to verify the scalability, efficiency and reliability of webapplications, and facilitates their rapid development.

 

The Company has a history of incurring net losses and had anaccumulated deficit of approximately $50.9 million as of June 30,2003.  The Company has funded theselosses principally from proceeds from equity financing.  Over the last two years, the Company has restructuredits business to significantly reduce total operating expenses throughreductions in workforce and the termination of certain leases.  On April 30, 2003, the Company furtherrestructured its operations by reducing its workforce, resulting in anapproximately 23% reduction of quarterly operating expenses.  Management believes that existing cash andcash equivalents will be adequate to fund operations through June 30,2004.

 

**2. ****Significant Accounting Policies**

 

The Company’s condensed consolidated financial statements are preparedin accordance with accounting principles generally accepted in the UnitedStates.  The significant policiesfollowed in the preparation of the condensed consolidated financial statements,applied on a consistent basis, are as follows:

 

*(a)*       Use of Estimates

 

The preparation of thefinancial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities as of the date of the financialstatements and the reported amounts of revenues and expenses during thereporting periods.  Actual results coulddiffer from these estimates.

 

*(b) Financial Statements in U.S. Dollars*

 

The consolidated financial statements of theCompany have been prepared in U.S. dollars because the currency of the primaryeconomic environment in which the operations of the Company are conducted isthe U.S. dollar. Substantially all of the Company’s sales are in U.S. dollars.Most purchases of materials, components and most marketing and management costsare denominated in U.S. dollars. Therefore, the functional currency of theCompany is the U.S. dollar.

 

Transactions and balances denominated in U.S.dollars are presented at their original amounts. Transactions and balances inother currencies are translated into U.S. dollars in accordance with theprinciples set forth in the Financial Accounting Standards Board of the UnitedStates (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 52, *Foreign Currency Translation*. Accordingly,items have been translated as follows:

 

•                  Monetary Items —At the exchange rate in effect on the balance sheet date.

•                  Nonmonetary Items— At historical exchange rates.

•                  Revenue andExpense Items — At the exchange rates in effect as of the date of recognitionof those items (excluding depreciation and other items deriving fromnonmonetary items).

 

All exchange gains and losses from the above-mentioned translation(which were immaterial for all periods presented) are reflected in thestatements of operations.  Therepresentative rate of exchange was U.S. $1.00 to 4.312 New Israeli Shekel(“NIS”) at June 30, 2003, U.S. $1.00 to NIS 4.737 at December 31, 2002, andU.S. $1.00 to NIS 4.769 at June 30, 2002.

 

6

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*(c)  Interim Financial Statements*

* *

The accompanying condensed consolidated balancesheet as of June 30, 2003 and the condensed consolidated statements ofoperations for the three and six months ended June 30, 2003 and 2002, and thecondensed consolidated statements of cash flows for the six months ended June30, 2002 and 2003 are unaudited but, in the opinion of management, include alladjustments, consisting of normal recurring adjustments, necessary for a fairpresentation of results for these interim periods.  Certain information and footnote disclosures normally included infinancial statements prepared in accordance with accounting principles generallyaccepted in the United States have been omitted, although the Company believesthat the disclosures included are adequate to make the information presentednot misleading. The condensed consolidated results of operations for the three andsix months ended June 30, 2003 are not necessarily indicative of the results tobe expected for the entire fiscal year. These condensed consolidated financial statements should be read inconjunction with the annual consolidated financial statements for 2002 andrelated notes included in the Company’s Form 10-K filed with the SEC on March26, 2003.

 

*(d)*       Research and Development Cost

 

The Company has evaluated the establishment of technologicalfeasibility of its products in accordance with SFAS No. 86, *Accounting for the Costs of Computer Software to BeSold, Leased or Otherwise Marketed*. The Company sells products in a market that is subject to rapidtechnological change, new product development and changing customer needs.  Accordingly, the Company has concluded thattechnological feasibility is not established until the development stage of theproduct is nearly complete.  The Companydefines technological feasibility as the completion of a working model.  The time period during which costs could becapitalized from the point of reaching technological feasibility until the timeof general product release is very short. Consequently, the amounts that could be capitalized are not material tothe Company’s financial position or results of operations.  Therefore, the Company has charged all suchcosts to research and development expense in the period incurred.

 

*(e)  Revenue Recognition*

* *

The Company recognizes revenue in accordance with Statement of Position(“SOP”) 97-2, *Software Revenue Recognition,*and SOP 98-9, *Modification of SOP 97-2, Software Revenue Recognition, WithRespect to Certain Transactions*. ****SOP 98-9********requires the use of the residual methodfor recognition of revenues when vendor-specific objective evidence exists forundelivered elements but does not exist for delivered elements of a softwarearrangement. If fair value for a delivered element does not exist but the fairvalue does exist for all undelivered elements, the Company defers the fairvalue of the undelivered elements and recognizes the remaining value for thedelivered elements.

 

Revenues from software product licenses are recognized upon delivery ofthe software provided there is persuasive evidence of an agreement, the fee isfixed or determinable and collection of the related receivable is probable.Revenues under multiple-element arrangements, which may include software,software maintenance and training, are allocated to each element based on theirrespective fair values, based on vendor-specific objective evidence. Thisobjective evidence represents the price of products and services when soldseparately. Revenue is recognized for software licenses sold to resellers ordistributors at the time of shipment, provided that all revenue recognitioncriteria set forth in SOP 97-2 are fulfilled.

 

Revenues from software maintenance agreements are recognized ratablyover the term of the maintenance period, which is typically one year. Revenuesfrom training arrangements are recognized as the services are performed.

 

The Company generally does not grant a right of return to itscustomers.  When a right of returnexists, revenue is deferred until the right of return expires, at which timerevenue is recognized provided that all other revenue recognition criteria aremet.

 

Amounts collected or billed prior to satisfying the above revenuerecognition criteria are reflected as deferred revenue.  Deferred revenue primarily representsdeferred maintenance revenue.

 

7

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*(f)*           Employee Stock Options

 

At June 30,2003, the Company has three stock option plans.  The Company accounts for those plans under the recognition andmeasurement principles of Accounting Principles Board Opinion No. 25 *Accounting for Stock Issued to Employees*and related interpretations (collectively “APB No. 25”).  Stock-based compensation included in thereported net loss relates to stock options issued to employees at an exerciseprice below the market price on the date of grant.  The following table illustrates the effect on net loss andearnings per share if the Company had applied the fair value recognitionprovisions of SFAS No. 123, *Accounting forStock-Based Compensation*, to stock-based employee compensation:

 
|                                                                                             |   | **Three Months Ended  June 30,**          |   | **Six Months Ended  June 30,** |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------------------------------|--------|
|                                                                                             |   | **2003**                                  |   | **2002**                       |   | **2003** |   | **2002** |   |
|                                                                                             |   | **(In thousands, except per share data)** |   |
|                                                                                             |   |                                      |   |                           |   |   |   |   |   |
| Net loss, as reported                                                                            |   | $                                         | (1,395 | )                              | $      | (1,637 | ) | $ | (2,936 | ) | $ | (3,582 | ) |
| Add:   Stock-based compensation included   in reported net loss                        |   | 103                                       |   | 129                            |   | 214 |   | 279 |   |
| Deduct:   Total stock-based compensation expense determined under fair value  based methods |   | (214                                      | )      | (238                           | )      | (452 | ) | (532 | ) |
| Pro forma net loss                                                                               |   | $                                         | (1,506 | )                              | $      | (1,746 | ) | $ | (3,174 | ) | $ | (3,835 | ) |
|                                                                                             |   |                                      |   |                           |   |   |   |   |   |
| Basic and diluted net loss per share                                                             |   |                                      |   |                           |   |   |   |   |   |
| As reported                                                                                      |   | $                                         | (0.08  | )                              | $      | (0.10 | ) | $ | (0.18 | ) | $ | (0.22 | ) |
| Pro forma                                                                                        |   | $                                         | (0.09  | )                              | $      | (0.11 | ) | $ | (0.19 | ) | $ | (0.23 | ) |

 

**3.  Earnings Per Share**

 

Basic and diluted net loss per share ispresented in conformity with SFAS No. 128, *EarningsPer Share*, for all periods presented.  Basic and diluted net loss per ordinary share was determined bydividing net loss by the weighted average number of ordinary shares outstandingduring the period.  Diluted net loss perordinary share is the same as basic net loss per ordinary share for all periodspresented, as the effects of the Company’s potential additional ordinary shareswere antidilutive.

 

The calculation of diluted net loss per shareexcludes outstanding stock options because their inclusion would beantidilutive.  There were approximately4,365,000 stock options outstanding as of June 30, 2003 and approximately2,608,000 stock options outstanding as of June 30, 2002.

 

8

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**4. ****Restructuring Charges**

 

The following is a reconciliation of the activity in the accruedrestructuring charge for each of the six-month periods ended June 30, 2002 and2003:

 
| **Description**                   |   | **Balance,  Beginning  of Period** |   | **Provision** |   | **Payments  and  Write-offs** |   | **Balance,  End of Period** |   |
|-----------------------------------|--------|------------------------------------|--------|---------------|--------|-------------------------------|--------|-----------------------------|--------|
|                              |   | **(In thousands)**                 |   |
| **Six Months Ended-**             |   |                               |   |          |   |                          |   |                        |   |
| **June 30, 2002:**                |   |                               |   |          |   |                          |   |                        |   |
| Employee severance costs          |   | $                                  | — |          | $      | 349                           |   | $                           | (276   | ) | $ | 73 |   |
| Idle-lease costs                  |   | 231                                |   | 46            |   | (64                           | )      | 213                         |   |
| Property and equipment impairment |   | —                             |   | 43            |   | (43                           | )      | —                      |   |
| Vendor contract termination fees  |   | —                             |   | 27            |   | (10                           | )      | 17                          |   |
|                              |   | $                                  | 231    |          | $      | 465                           |   | $                           | (393   | ) | $ | 303 |   |
| **June 30, 2003:**                |   |                               |   |          |   |                          |   |                        |   |
| Employee severance costs          |   | $                                  | — |          | $      | 207                           |   | $                           | (105   | ) | $ | 102 |   |
| Idle-lease costs                  |   | 612                                |   | 26            |   | (144                          | )      | 494                         |   |
| Property and equipment impairment |   | —                             |   | 4             |   | —                        |   | 4                           |   |
| Vendor contract termination fees  |   | —                             |   | 8             |   | (8                            | )      | —                      |   |
|                              |   | $                                  | 612    |          | $      | 245                           |   | $                           | (257   | ) | $ | 600 |   |

 

On April 30, 2003, theCompany restructured its operations resulting in an approximately 23% reductionof quarterly operating expenses.  The restructuring charge totaled $245,000 andconsisted of employee severance costs, facility termination charges,idle-lease costs, property and equipment impairment, and vendor contracttermination fees.  Employee severance costs for the six monthsended June 30, 2003 resulted from the termination of 20 employees, of whom 6were sales and marketing employees, 11 were research and development employees,and 3 were general and administrative employees.

 

Amounts payable within one year have beenclassified as a current liability in the accompanying condensed consolidatedbalance sheets.

 

**5. Disclosures About Segments of an Enterprise**

 

To date, the Company has viewed its operations and has managed itsbusiness as principally one operating segment.

 

The Company’s revenues by the geographic location of the customer areas follows:

 
|           |   | **Three Months Ended  June 30,** |   | **Six Months Ended  June 30,** |   |
|----------------|--------|----------------------------------|--------|--------------------------------|--------|
|           |   | **2003**                         |   | **2002**                       |   | **2003** |   | **2002** |   |
|           |   | **(In thousands)**               |   |
|           |   |                             |   |                           |   |   |   |   |   |
| United States  |   | $                                | 804    |                           | $      | 927 |   | $ | 1,582 |   | $ | 1,811 |   |
| Europe         |   | 81                               |   | 131                            |   | 255 |   | 336 |   |
| Israel         |   | 167                              |   | 180                            |   | 329 |   | 370 |   |
| Other          |   | 159                              |   | 180                            |   | 265 |   | 475 |   |
| Total revenues |   | $                                | 1,211  |                           | $      | 1,418 |   | $ | 2,431 |   | $ | 2,992 |   |

 

9

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**MANAGEMENT’SDISCUSSION AND ANALYSIS OF**

**FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

*Statements in this Quarterly Report on Form 10-Q concerning RadView’sbusiness outlook or future performance; anticipated revenues, expenses or otherfinancial items; product introductions and plans and objectives relatedthereto; and statements concerning assumptions made or expectations as to anyfuture events, conditions, performance or other matters, are “forward-lookingstatements” as that term is defined under U. S. federal securities laws.Forward-looking statements are subject to various risks, uncertainties andother factors that could cause actual results to differ materially from thosestated in such statements. These risks, uncertainties and factors include, butare not limited to: our history of losses; market acceptance of our products;our ability to develop new products and enhance existing products; impact of significantcompetition; and other factors detailed in RadView’s filings with theSecurities and Exchange Commission, including this Quarterly Report on Form10-Q.*

 

# **Overview**

 

RadView develops, marketsand supports software that enables companies to assure the scalability,efficiency and reliability of web applications.  In 1997, we introduced our first web-testing product, WebLOAD,which was initially focused on assessing the scalability of web applications.  Since then, we have enhanced thefunctionality of WebLOAD to provide an integrated solution to assess theperformance and accelerate the deployment of web applications.  In February 2000, we introduced WebRM, whichis designed to facilitate the systematic verification of web applicationquality throughout the application development lifecycle and to accelerate thedeployment of high performance web applications.  In August 2001, we introduced WebFT, a testing tool forverification of the functionality of web applications.  In July 2003, we introduced WebLOADAnalyzer, a solution for use in identifying the root-cause of performanceproblems within web applications

 

On April 30, 2003, the Company restructured its operations by reducingits workforce, resulting in an approximately 23% reduction of quarterly operatingexpenses.  As a result of therestructuring, the Company appointed Mr. Christopher Dineen as the ChiefFinancial Officer effective on June 1, 2003. Mr. Dineen was previously the Company’s Vice President of Finance.

 

# **Application of CriticalAccounting Policies**

 

***General***

 

We prepare ourconsolidated financial statements in conformity with accounting principlesgenerally accepted in the U.S.  As such,we are required to make certain estimates, judgments and assumptions that webelieve are reasonable based upon the information available. These estimatesand assumptions affect the reported amounts of assets and liabilities at thedate of the financial statements and the reported amounts of revenues andexpenses during the periods presented. To fully understand and evaluate our reported financial results, webelieve it is important to understand our policies for revenue recognition,software development costs and stock options.

 

***Revenue Recognition***

 

We recognize software license revenues upon delivery of our software tocustomers, provided persuasive evidence of an agreement exists, the fee isfixed or determinable and collection of the related receivable isprobable.  We allocate our softwarelicense revenues under arrangements where we sell software and servicestogether under one contract to each element based on its relative fair value,with these fair values being determined using the price charged when thatelement is sold separately.  If fairvalue for a delivered element does not exist but the fair value does exist forall undelivered elements, we defer the fair value of the undelivered elementsand recognize the remaining value for the delivered elements.

 

We generally recognize software license revenues from resellers ordistributors at the time of shipment, provided that all other revenuerecognition criteria set forth in governing statements of position on softwarerevenue recognition have been met.  Werecognize services revenues from software maintenance agreements ratably overthe term of the maintenance period, typically one year.  We recognize services revenues from trainingas the services are

 

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performed.  Amounts collected or billed prior tosatisfying the above revenue recognition criteria are reflected as deferredrevenue.

 

***Software DevelopmentCosts***

 

We account for software development costs in accordance with SFAS No.86, *Accounting for the Costs of ComputerSoftware to Be Sold, Leased or Otherwise Marketed*.  Software development costs incurred from thepoint of reaching technological feasibility until the time of general productrelease should be capitalized.  Wedefine technological feasibility as the completion of a working model.  Because we sell our products in a marketthat is subject to rapid technological change, new product development andchanging customer needs, we have concluded that technological feasibility isnot established until the development stage of the product is nearlycomplete.  For us, the period in whichwe can capitalize software development costs is very short, so the amounts thatcould be capitalized are not material to our financial statements.  Therefore, we have charged all such costs toresearch and development expense in the period incurred.

 

***Stock Options***

 

We account for stock options issued to employees under the intrinsicmethod in accordance with Accounting Principles Board, or APB, Opinion No. 25, *Accounting for Stock Issued to Employees*.  Under this approach we do not record anyexpense unless the exercise price of a granted option is greater than the fairmarket price of our ordinary shares on the date of grant.   We have provided disclosures of impact toour reported net loss and earnings per share if we had applied the fair valueprovisions of SFAS No. 123, *Accounting forStock-Based Compensation*, to stock-based employee compensation.

 

**Results of Operations**

 

The following table sets forth, as a percentage of total revenues,consolidated statement of operations data for the periods indicated:

 
|                       |   | **Three Months  Ended  June 30,** |   | **Six Months  Ended  June 30,** |   |
|----------------------------|--------|-----------------------------------|--------|---------------------------------|--------|
|                       |   | **2003**                          |   | **2002**                        |   | **2003** |   | **2002** |   |
| Revenues:                  |   |                              |   |                            |   |   |   |   |   |
| Software licenses          |   | 51.4                              | %      | 56.5                            | %      | 53.0 | % | 59.5 | % |
| Service                    |   | 48.6                              |   | 43.5                            |   | 47.0 |   | 40.5 |   |
| Total revenues             |   | 100.0                             |   | 100.0                           |   | 100.0 |   | 100.0 |   |
|                       |   |                              |   |                            |   |   |   |   |   |
| Cost of Sales:             |   |                              |   |                            |   |   |   |   |   |
| Software licenses          |   | 1.2                               |   | 0.9                             |   | 1.4 |   | 0.8 |   |
| Service                    |   | 9.2                               |   | 11.2                            |   | 9.5 |   | 10.7 |   |
| Total cost of sales        |   | 10.4                              |   | 12.1                            |   | 10.9 |   | 11.5 |   |
|                       |   |                              |   |                            |   |   |   |   |   |
| Gross Profit               |   | 89.6                              |   | 87.9                            |   | 89.1 |   | 88.5 |   |
|                       |   |                              |   |                            |   |   |   |   |   |
| Operating Expenses:        |   |                              |   |                            |   |   |   |   |   |
| Sales and marketing        |   | 85.9                              |   | 97.2                            |   | 93.4 |   | 94.1 |   |
| Research and development   |   | 53.7                              |   | 60.0                            |   | 61.7 |   | 57.3 |   |
| General and administrative |   | 33.5                              |   | 34.0                            |   | 34.7 |   | 36.9 |   |
| Stock-based compensation   |   | 8.5                               |   | 9.1                             |   | 8.7 |   | 9.3 |   |
| Restructuring charges      |   | 20.2                              |   | 9.2                             |   | 10.1 |   | 15.5 |   |
| Total operating expenses   |   | 201.8                             |   | 209.5                           |   | 208.6 |   | 213.1 |   |
|                       |   |                              |   |                            |   |   |   |   |   |
| Operating loss             |   | (112.2                            | )      | (121.6                          | )      | (119.5 | ) | (124.6 | ) |
|                       |   |                              |   |                            |   |   |   |   |   |
| Interest income, net       |   | 0.8                               |   | 2.4                             |   | 0.9 |   | 2.3 |   |
| Other income (expense)     |   | (3.8                              | )      | 3.8                             |   | (2.2 | ) | 2.6 |   |
|                       |   |                              |   |                            |   |   |   |   |   |
| Net loss                   |   | (115.2                            | )%     | (115.4                          | )%     | (120.8 | )% | (119.7 | )% |

 

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**Three and Six MonthsEnded June 30, 2003 and 2002**

 

***Revenues***

 

*Total Revenues*. Total revenues were $1.2 million for thethree months ended June 30, 2003 and $1.4 million for the same period in 2002,which represents a decrease of $207,000, or 14.6%.  Total revenues were $2.4 million for the six months ended June30, 2003 and $3.0 million for the same period in 2002, which represents adecrease of $561,000, or 18.8%.  Totalrevenues decreased due to declines in both software licenses revenues andservice revenues.

 

*SoftwareLicenses*.  Software license revenues were $622,000 forthe three months ended June 30, 2003 and reflects a decrease of $179,000, or22.3%, as compared to software license revenues of $801,000 for the same periodin 2002.  This decrease consisted of adecline in software license revenues of $19,000 from U.S. customers and$160,000 from international customers.

 

Software license revenues were $1.3 millionfor the six months ended June 30, 2003 and reflects a decrease of $490,000, or27.5%, as compared to software license revenues of $1.8 million for the sameperiod in 2002.  This decrease consistedof a decline in software license revenues of $109,000 from U.S. customers and$381,000 from international customers.

 

 Thedecreases in software license revenues for the three and six months ended June30, 2003 as compared to the same periods in 2002, resulted from lower unitvolume sales attributable to weakness in the global economy and slowertechnology spending.

 

*Services*. Service revenues were $589,000 for the three months ended June 30, 2003,showing a decrease of $28,000, or 4.5%, as compared to service revenues of$617,000 for the same period in 2002. This decrease consisted of a decline in services revenues of $72,000from U.S. customers, offset, in part, by an increase in services revenues of$44,000 from international customers.

 

Service revenues were $1.1 million for thesix months ended June 30, 2003, representing a decrease of $71,000, or 5.9%, ascompared to service revenues of $1.2 million for the same period in 2002.  This decrease consisted of a decline inservices revenues of $121,000 from U.S. customers, offset, in part, by a$50,000 increase of services revenues from international customers.

 

The decrease in U.S. service revenuesresulted from the decline in maintenance services and training services thattypically accompany software license orders. The increase in international service revenues resulted from providingsupport and maintenance services to a larger installed customer baseinternationally.

 

***Costof Revenues***

 

*Cost ofSoftware Licenses*. Cost of software licenses consists principally of direct product costs,such as product media and packaging, as well as royalties due to thirdparties.  Cost of software licensesincreased from $12,000, or 1.5% of software license revenue, for the threemonths ended June 30, 2002 to $15,000, or 2.4% of software license revenue, forthe same period in 2003.  Cost ofsoftware licenses increased from $25,000, or 1.4% of software license revenue,for the six months ended June 30, 2002 to $35,000, or 2.7% of software licenserevenue, for the same period in 2003.

 

*Cost ofServices*. Costof services consists principally of personnel-related costs associated withcustomer support and training.  Cost ofservices decreased from $159,000, or 25.8% of service revenue, for the threemonths ended June 30, 2002 to $111,000, or 18.8% of service revenue,for the same period in 2003.  Cost ofservices decreased from $319,000, or 26.3% of service revenue, for the sixmonths ended June 30, 2002 to $230,000, or 20.1% of service revenue, for thesame period in 2003.  These decreaseswere due to reduced personnel costs to provide support and maintenance servicesresulting from the headcount reductions taken in 2002 and 2003.

 

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***OperatingExpenses***

 

*Sales andMarketing*.  Sales and marketing expenses consistprincipally of salaries and commissions earned by sales personnel, travel andmarketing program costs such as trade shows, advertising and productpromotion.  Sales and marketing expensesdecreased from $1.4 million, or 97.2% of total revenues, for the three monthsended June 30, 2002 to $1.0 million, or 85.9% of total revenues, for the sameperiod in 2003.  Sales and marketingexpenses decreased from $2.8 million, or 94.1% of total revenues, for the sixmonths ended June 30, 2002 to $2.3 million, or 93.4% of total revenues, for thesame period in 2003.  These decreaseswere due primarily to headcount reductions of sales and marketing personnel in2002 and 2003.

 

*Research andDevelopment*.  Research and development expenses consistprincipally of salaries and related expenses required to develop and enhancethe Company’s products.  Research anddevelopment expenses decreased from $851,000, or 60.0% of total revenues, forthe three months ended June 30, 2002, to $650,000, or 53.7% of total revenues,for the same period in 2003.  Researchand development expenses decreased from $1.7 million, or 57.3% of totalrevenues, for the six months ended June 30, 2002, to $1.5 million, or 61.7% oftotal revenues, for the same period in 2003. The decrease in absolute dollars was due primarily to headcountreductions of research and development personnel in 2002 and 2003.

 

*General andAdministrative*.  General and administrative expenses consistprincipally of finance, executive and administrative salaries and related expenses,professional fees and other costs associated with being a public company.  General and administrative expensesdecreased from $482,000, or 34.0% of total revenues, for the three months endedJune 30, 2002 to $406,000, or 33.5% of total revenues, for the same period in2003.  General and administrativeexpenses decreased from $1.1 million, or 36.9% of total revenues, for the sixmonths ended June 30, 2002 to $843,000, or 34.7% of total revenues, for thesame period in 2003.  These decreaseswere due to lower professional fees incurred in 2003 as compared to 2002 andheadcount reductions of general and administrative personnel in 2003.

 

*Stock-basedCompensation*.Stock-based compensation expense reflects the accounting charge relating to theissuance of equity instruments to employees at an exercise price below fairmarket value at the date of grant and to all equity instruments issued tononemployees.  For stock options grantedto employees, the difference between the exercise price and the estimated fairvalue of the ordinary shares on the date options are granted is charged tooperations as stock-based compensation expense over the vesting period of theunderlying options.  For stock optionsgranted to nonemployees, the value of a particular grant as determined by theBlack-Scholes valuation model is charged to operations as stock-basedcompensation expense over the service period or vesting period of theunderlying option.  Stock-basedcompensation expense was $103,000 for the three months ended June 30, 2003compared to $129,000 for the same period in 2002.  Stock-based compensation expense was $214,000 for the six monthsended June 30, 2003 compared to $279,000 for the same period in 2002.  These decreases resulted from the forfeitureof employee stock options for terminated employees for whom stock-basedcompensation was originally recorded.

 

Deferred compensation on the unvested optionsis included as a component of shareholders’ equity and amortized to stock-basedcompensation expense over the vesting period of the underlying options.  Deferred stock-based compensation totaled$272,000 at June 30, 2003, and will result in additional charges to operationsthrough May 2004.

 

*RestructuringCharges*.  Restructuring charges totaled $245,000 forthe three months ended June 30, 2003 and $131,000 for the same period in 2002. Restructuring expenses totaled $245,000 for the six months ended June30, 2003 and $465,000 for the sameperiod in 2002.

 

The restructuring chargeof $245,000 for the six months ended June 30, 2003 was incurred in April 2003,when we restructured our operations by reducing our workforce.  The charge consisted of severance costs forterminated employees of $207,000, lease termination costs of $26,000, fixedasset impairment and other costs of $12,000. A total of 20 employees were terminated, or approximately 27% of thethen current workforce, of whom 6 employees

 

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were from sales and marketing,11 employees were from research and development, and three employees were fromgeneral and administrative.

 

The restructuring chargesof $465,000 recorded in the six months ended June 30, 2002, were incurred inJanuary 2002, when we implemented restructuring plans in an effort to loweroperating costs.  The restructuringplans and related charges recorded in the first quarter of 2002 consisted ofseverance costs for terminated employees of $349,000, lease termination costsof $46,000, property and equipment impairment and other costs of $70,000.  A total of 26 employees were terminated, orapproximately 27% of the then current workforce, of whom 13 employees were fromsales and marketing, 11 employees were from research and development, and twoemployees were from general and administrative.

 

*Interest Income,Net*. Interestincome, net consists principally of interest earned on cashinvestments.  Interest income, net was$10,000 for the three months ended June 30, 2003 compared to $34,000 for thesame period in 2002.  Interest income,net was $24,000 for the six months ended June 30, 2003 compared to $69,000 forthe same period in 2002.  The decreasesin interest income resulted from lower invested cash balances and lowerinterest rates in 2003 when compared to 2002.

 

*Other Income(Expense), Net*.Other income (expense), net consists principally of currency translation gainsand losses.  There was other expense of$46,000 for the three months ended June 30, 2003 compared to other income of$53,000 for the same period in 2002. There was other expense of $54,000 for the six months ended June 30,2003 compared to other income of $78,000 for the same period in 2002.  These changes were due to exchange ratefluctuations.

 

*Income Taxes.*  The Company has estimated net operating losscarryforwards for Israeli tax purposes totaling approximately $16.1 millionthrough June 30, 2003 that would reduce future Israeli income taxes, if any.These net operating losses may be carried forward indefinitely and offsetagainst future taxable income.  Therewill be no tax benefit available from these losses and no deferred income taxeshave been included in the Company’s consolidated financial statements.

 

The Company’s U.S. subsidiary has net operatingloss carryforwards for U.S. Federal and state tax purposes totalingapproximately $26.8 million through June 30, 2003.  These losses are available to offset any future U.S. taxableincome of the U.S. subsidiary and will expire between 2012 and 2023.  The Company has recorded a full valuationallowance against its deferred tax asset due to the uncertainty surrounding theability and the timing of the realization of these tax benefits.

 

**Liquidity and CapitalResources**

 

Cash and cash equivalents totaled $5.0million as of June 30, 2003 compared to $7.6 million as of December 31, 2002.

 

Cash used in operating activities was $2.6million for the six months ended June 30, 2003 and $2.8 million for the sameperiod in 2002.  Cash usedin operating activities for the six months ended June 30, 2003 was due to a netloss of $2.9 million, a decrease of $202,000 in accrued severance pay, adecrease of $431,000 in accrued expenses, and a decrease of $12,000 in accruedrestructuring charge, offset, in part, by depreciation of $372,000,amortization of deferred compensation of $214,000, a decrease of $140,000 inaccounts receivable, a decrease of $122,000 in prepaid expenses, an increase of$37,000 in accounts payable and an increase of $122,000 in deferredrevenue.  Cash used in operatingactivities for the six months ended June 30, 2002 was due to a net loss of $3.6million, a decrease of $31,000 in accrued severance pay, a decrease of $160,000in accounts payable, a decrease of $194,000 in accrued expenses, and a decreaseof $143,000 in deferred revenue, offset, in part, by depreciation of $481,000, amortizationof deferred compensation of $279,000, other non-cash charges of $43,000, adecrease of $432,000 in accounts receivable, a decrease of $41,000 in prepaidexpenses, and an increase of $72,000 in accrued restructuring charge.

 

Cash provided by investing activities was$16,000 for the six months ended June 30, 2003 and cash used in investingactivities was $47,000 for the same period in 2002.  Cash provided by investing activities for the six months endedJune 30, 2003 was primarily from a decrease in other assets of $97,000, offset,in part, by purchases of

 

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$81,000 in property andequipment.  Cash used in investingactivities for the six months ended June 30, 2003 was primarily for purchasesof $59,000 in property and equipment, offset, in part, by a decrease of $12,000in other assets.

 

Cash from investing activities was $4,000 forthe six months ended June 30, 2003 and there was no cash used in financingactivities for the six months ended June 30, 2002.  Cash from financing activities for the six months ended June 30,2002 consisted of $3,000 of proceeds from shares issued and $1,000 fromproceeds from employee share purchase plan.

 

We lease all of our office facilities under noncancellable operatingleases that expire over varying terms through 2005.  As of June 30, 2003, the future total lease payments under theseleases, before reductions for idle-lease costs of $494,000 included in accruedrestructuring, were as follows: $293,000 in 2003, $517,000 in 2004, and$166,000 in 2005.

 

We expect that operating expenses, as well asplanned capital expenditures, will constitute a material use of our cashresources.  We believe that our existingcash and cash equivalents will be sufficient to meet our anticipated needs forworking capital and capital expenditures for at least the next 12 months.  We may find it necessary to obtainadditional equity or debt financing.  Inthe event additional financing is required, we may not be able to completefinancing on acceptable terms or at all.

 

**ITEM3****.  QUALITATIVE ANDQUANTITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The Company does not use derivative financial instruments in itsinvesting portfolio.  The Company placesits investments in instruments that meet high credit quality standards such asmoney market funds, government securities, and commercial paper.  The Company limits the amount of creditexposure to any one issuer.  The Companydoes not expect any material loss with respect to its investment portfolio.

 

The Company conducts business in various foreign currencies, primarilyin Europe and Israel.  As a result, theCompany is exposed to the effect of foreign currency exchange rate fluctuationson the U.S. dollar value of foreign currency-denominated revenues andexpenses.  The Company does not useforeign exchange forward contracts to hedge its foreign currency denominatedreceivables.  Looking forward, there canbe no assurance that changes in foreign currency rates, relative to the U.S.dollar, will not materially adversely affect the consolidated results of theCompany.

 

**ITEM4****.  CONTROLS ANDPROCEDURES**

 

**Evaluation of Controls and Procedures**

 

We carried out an evaluation, under the supervision and with theparticipation of the Company’s management, including the Company’s ChiefExecutive Officer (“CEO”) and Chief Financial Officer (“CFO”), of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures as of the end of the period covered by this Quarterly Report onForm 10-Q. Based on this evaluation, the CEO and CFO have concluded that theCompany’s disclosure controls and procedures are effective to ensure thatmaterial information is recorded, processed, summarized and reported bymanagement of the Company on a timely basis in order to comply with theCompany’s disclosure obligations under the Securities Exchange Act of 1934 andthe SEC rules thereunder.

 

**Changes in internal controls**

 

There were no significant changes in the Company’s internal controls orin other factors that could significantly affect these controls subsequent tothe date of the evaluation.

 

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**PART II - OTHER INFORMATION**

 

**Item2.  Changesin Securities**

 

**(d) Useof Proceeds from Sale of RegisteredSecurities**

 

On August 9, 2000, in connection with ourinitial public offering, the Securities and Exchange Commission declaredeffective a Registration Statement on Form F-1 (No. 333-41526) that registered5,750,000 ordinary shares.  The managingunderwriters in the offering were Donaldson Lufkin Jenrette, Wit SoundView,Piper Jaffrey, and DLJdirect.

 

On August 15, 2000, wesold 4,000,000 of such ordinary shares at an initial public offering price of$10.00 per share, generating gross offering proceeds of $40 million.  After deducting $2.8 million in underwritingdiscounts and approximately $1.9 million in other related expenses, the netproceeds to us were approximately $35.3 million.

 

Through June 30, 2003, we have used $30.2 million of the net proceedsfrom our initial public offering as follows:

•                  $1.9million for capital expenditures;

•                  $1.4million for repayment of principal and accrued interest on a loan with Rad DataCommunications, Inc., a related party;

•                  $3.8million for repayment of principal and accrued interest on long-term debt witha bank;

•                  $100,000for the repurchase of ordinary shares; and

•                  $23.0million for working capital.

 

**Item6.  Exhibitsand Reports on Form 8-K**

 

**(a) Exhibit Index**

 

31.1*                    Certification by Chief ExecutiveOfficer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of 2002.

 

31.2*                    Certification by Chief FinancialOfficer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of 2002.

 

32*                             Certification pursuant to18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.

 

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*  Filed herewith

 

 

**(b) Reports on Form 8-K:**

 

•                  OnApril 30, 2003, RadView Software Ltd. issued a press release announcing itsearnings for the quarter ended March 31, 2003.

•                  OnMay 15, 2003, RadView Software Ltd. appointed Christopher Dineen as ChiefFinancial Officer effective June 1, 2003.

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities and Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned thereunto duly authorized.

 

 
|                        | RADVIEW SOFTWARE LTD.   |
|-----------------------------|-------------------------|
|                        |                    |
|                        |                    |
| Date:  August 12, 2003 | /s/ CHRISTOPHER DINEEN  |   |
|                        | Christopher Dineen      |
|                        | Chief Financial Officer |

 

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